Choosing a Company Car – Summary

A company car is a vehicle that is used for personal (as well as possibly business) use and is primarily offered as a benefit to employees and managers to make them feel more valued. Employees with ‘business-like’ cars will leave a better first impression when visiting customers or suppliers. Providing a company car is generally cheaper than renting a car several times a month.

Purchasing outright can cost from £5000 to over £30,000 depending on the car, leasing can cost from £100 to over £1000 per month depending on the car and length of contract.

Purchasing cars outright will severely dent cash-flow, but has the key advantage of ownership, allowing you to sell the car when you wish to upgrade or change. Maintenance and insurance costs will almost always be extra.

Leasing and hiring will be much easier on your cash-flow; however, you never own the car. Maintenance and Insurance are usually available as discounted extras, and importantly, the employee pays little or no tax on a hired company car.

The primary tax on a company car is a percentage of its list price based upon its efficiency, you also need to pay Class 1A NIC’s on the benefit (I.e.: The car). If you pay for some/all of an employee’s private fuel, you also need to pay a fixed charge dependent on fuel type and engine size.

When choosing a company car (or list of cars) for an employee, it is crucial to take into account their position in the company and salary when allocating them a price of company car. Allowing them to pay the difference for a better car may help make up a gap in choice.

It is important to take into account the employee’s needs from a car, by offering a wide choice of cars you can make sure everybody is catered for within the right budget.